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Main market forms

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Main market forms

  1. 1. Market • Market is a place in which buyers and sellers come into contact for the purchase and sale of goods and services.
  2. 2. Market structure • refers to number of firms operating in an industry, nature of competition between them and the nature of product.
  3. 3. Types of market • Perfect competition. • Monopoly. • Monopolistic Competition • Oligopoly.
  4. 4. Perfect competition • It refers to a market situation in which there are large number of buyers and sellers. Firms sell homogeneous products at a uniform price.
  5. 5. perfect competition is a price taker not a price maker • A firm under perfect competition is a price taker not a price maker because the price is determined by the market forces of demand of supply. This price is known as equilibrium price. All the firms in the industry have to sell their outputs at this equilibrium price. The reason is that, number of firms under perfect competition is so large. So no firm can influence the price by its supply. All firms produce homogeneous product.
  6. 6. perfect competition is a price taker not a price maker
  7. 7. Demand Curve Under Perfect Competition • There are very large numbers of buyers and sellers selling a homogeneous product at a price fixed by the market . • Therefore, each firm is a price taker and faces a perfectly elastic demand curve.
  8. 8. Monopoly market • Monopoly is a market situation dominated by a single seller who has full control over the price.
  9. 9. Monopolistic competition • It refers to a market situation in which there are many firms who sell closely related but differentiated products.
  10. 10. Demand Curve : Monopolistic COMPETITION vs MONOPOLY • The demand curve of monopolistic competition looks exactly like the demand curve monopoly as both faces downward sloping demand curves. However Demand Curve under monopolistic competition is more elastic as compared to demand curve under monopoly. This happens because differentiated products under monopolistic competition.
  11. 11. Demand Curve : Monopolistic COMPETITION vs MONOPOLY
  12. 12. Oligopoly • It is a market structure in which there are few large sellers of a commodity and large number of buyers.
  13. 13. Duopoly • It is a special case of oligopoly , in which there are exactly two sellers. • Under Duopoly, it is assumed that the product sold by the two firms is homogeneous and there is no Substitute for it. • E.g., Pepsi and Coca-Cola in the soft drink market.
  14. 14. Features of perfect competition • Very large number of buyers and sellers. • Homogeneous product. • Free entry and exit of firms. • Perfect knowledge. • Firm is a price taker and industry is price maker. • Perfectly elastic demand curve (AR=MR) • Perfect mobility of factors of production. • Absence of transportation cost. • Absence of selling cost.
  15. 15. Features of monopoly • Single seller of a commodity. • Absence of close substitute of the product. • Difficulty of entry of a new firm. • Negatively sloped demand curve(AR>MR) • Full control over price. • Price discrimination exists • Existence of abnormal profit
  16. 16. Features of monopolistic competition • Large number of buyers and sellers but less than perfect competition. • Product differentiation. • Freedom of entry and exit. • Selling cost. • Lack of perfect knowledge. • High transportation cost. • Partial control over price.
  17. 17. Main features of Oligopoly • Few dominant firms who are large in size • Mutual interdependence. • Barrier to entry. • Homogeneous or differentiated product. • Price rigidity.
  18. 18. Features of pure competition • Large number of buyers and sellers. • Homogeneous products. • Free entry and exit of firm.

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